New 401(K) Plan Platform Offers Cryptocurrency Investments

It was only a matter of time, but cryptocurrency investments are now available in 401(k) retirement plans.

ForUsAll, a retirement investment platform that focuses on small businesses, has launched Alt 401(k), a retirement investment platform that allows employers to provide alternative investment options within their retirement plans. As the plan’s first alternative investment, ForUsAll is providing employers the option to offer cryptocurrency by selecting cryptocurrency platform Coinbase Institutional.

The platform provides employers with the choice to include cryptocurrency via a self-directed alt window inside their 401(k) plans, where participants can invest in more than 50 cryptocurrencies along with the rest of their investment lineup. The firm acknowledges that cryptocurrency has the potential to be risky and volatile, so the investments are capped at 5% of a participant’s portfolio. ForUsAll says it also closely monitors allocations and alerts employees when their overall cryptocurrency allocation exceeds 5% of their portfolio so they can rebalance into more traditional mutual funds.

“Without access to these portfolio building blocks and expert help to prudently use these asset classes, the average American may be at a structural disadvantage,” David Ramirez, co-founder and chief investment officer of ForUsAll, said in a statement. “Alternative investments, including small allocations to cryptocurrency, can help improve portfolio diversification and expected returns. However, the volatility and the complexity of these asset classes make prudent education and advice for employees essential.”

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The company touts tax efficiency as an added benefit to including cryptocurrency in a 401(k) plan, saying the cryptocurrency purchases would be treated like other investments in the plan for tax purposes, and any gains would be tax-deferred until they are withdrawn from the 401(k). The firm adds that the gains could even be tax-free forever with a Roth account, and notes that investors would not incur taxes when they sell cryptocurrencies to rebalance their portfolio after significant gain.

Diversification is another advantage cryptocurrency can offer, according to ForUsAll, which says a relatively small allocation may increase expected return without increasing the level of overall expected risk. It also said the growing interest in cryptocurrencies, particularly among younger employees, may help more participants engage more in their retirement plans and save more as a result.

“For too long, too many Americans haven’t had the same access to alternative investments that wealthy and professional investors have had,” Jeff Schulte, CEO of ForUsAll, said in a statement. “By introducing the Alt 401(k), we are democratizing access to what drives wealth for the wealthy.”

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Tags: Alt 401(k), Alternative Investment, Coinbase Institutional, Cryptocurrency, ForUsAll, Jeff Schulte, retirement investment

With the help of “sophisticated data analysis” the US Securities and Exchange Commission (SEC) said it was able to break up an insider trading ring that generated nearly $1.7 million in illegal gains by trading on the confidential earnings information of Silicon Valley tech companies Infinera Corporation and Fortinet Inc.

According to the SEC’s complaint, Nathaniel Brown, who was the revenue recognition manager for San Jose, California-based telecommunications equipment company Infinera Corporation, repeatedly provided information about the company’s quarterly earnings and financial performance before they were made public to his best friend, Benjamin Wylam, a high school teacher and bookmaker.

The SEC alleges Wylam traded on the tips and also passed the information on to Naveen Sood, who owed Wylam a six-figure gambling debt. Sood allegedly also traded on the information and tipped his friends Marcus Bannon, Matthew Rauch, and Naresh Ramaiya, each of whom also illegally traded on the information, according to the complaint.

For example, after allegedly receiving material nonpublic information from Brown that Infinera’s upcoming second quarter announcement would be negative, Wylam built a large short position on the stock. Between July 11 and July 27, 2016, Wylam sold the 6,500 Infinera shares that he owned, shorted 17,900 Infinera shares, and purchased nearly 4,000 Infinera put option contracts. In total, Wylam spent $326,000 accumulating a short position before Infinera’s negative second quarter announcement.

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The regulator also alleges Bannon provided Sood with material, nonpublic information about cybersecurity company Fortinet Inc., where he worked. The SEC alleges that in early October 2016, Bannon learned that Fortinet was going to unexpectedly announce preliminary financial results that were negative. Bannon allegedly tipped this information to Sood, who used it to trade on, and who then passed on the information to Wylam and Ramaiya, who also traded on the information.

Without admitting to or denying the allegations in the complaint, Bannon, Rauch, and Ramaiya consented to the entry of final judgments. Bannon agreed to pay a civil penalty of over $280,000; Rauch agreed to pay a civil penalty of over $128,000; and Ramaiya agreed to pay a civil penalty of nearly $66,000. Sood also consented to the entry of a final judgment and agreed to pay a civil penalty of more than $178,000. Wylam has consented to a permanent injunction with civil penalties, if any, to be decided later by the court. The SEC said its litigation against Brown is ongoing.

“Using sophisticated data analysis, the SEC was able to uncover this insider trading ring and hold each of its participants accountable to ensure the integrity of our markets,” Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said in a statement.

The US Attorney’s Office for the Northern District of California, in a parallel investigation, filed related criminal charges against Brown, Wylam, and Sood.